UK: Star Wars - May The IP Be With You

You must have been living in a different galaxy if you
weren't somehow swept up in Star Wars mania over the Christmas
holidays. The new Star Wars film, The Force Awakens,
smashed box office records all over the world when it was released
late in December 2015, with global ticket sales of $529m
(£355m) in its debut weekend. It is also reported to have had
the biggest opening day and Saturday receipts in UK and Ireland box
office history. At the time of writing, total global sales since
release are said to have reached a whopping $1.6bn.

And that is just the cinema! The entire Star Wars franchise is
probably the most lucrative franchise in the world, generating in
the region of $30 billion in revenue over the past 38 years.
The Force Awakens is expected to be its biggest money
spinner yet. Disney clearly knew it was on to a good thing when it
acquired Lucasfilm (which included the entire Star Wars franchise),
the company behind the Star Wars films, from founder George Lucas
himself in 2012 for $4.05bn (£2.5bn) – a bargain it
turns out when you consider the mind boggling revenue figures
already associated with this film – and that's even
before the DVD sales and published merchandise and licensing
revenue.

This article looks at the types of intellectual property linked
to the Star Wars brand and how these intellectual property rights
have been exploited to create probably the most successful
franchise of all time.

Intellectual property rights

All or a combination of copyright, trade marks, design rights
and patents are relevant when considering the types of intellectual
property relating to the Star Wars franchise.

Copyright

UK copyright law protects original literary works, (works other
than dramatic or musical works written, spoken or sung, so, text in
Star Wars books (Disney Publishing announced a series of 20 books
and e-books entitled "Journey to Star Wars: The Force
Awakens" which were released before the film came out),
magazines and lyrics in songs), dramatic works (plays, screen
plays), musical works (music score in songs, excluding the lyrics),
sound recordings (e.g. sound tracks), films (a feature film, such
as The Force Awakens, or TV programmes) and artistic
works. Artistic works would include graphics, logos, photographs,
sculptures and of great relevance to the Star Wars franchise,
images of a fictional character are protected as artistic works
e.g. R2-D2, Yoda etc. Such fictional characters can then be
reproduced on a mug or lunchbox, or clothing. Under UK law,
artistic works also include 'works of artistic
craftsmanship' but rather unhelpfully, the UK Copyright Designs
and Copyright Act 1988 does not define these.

Interestingly, whether or not the Star Wars stormtrooper helmet
could be considered an artistic work was the subject of the one of
the most well-known copyright cases in legal history in 2011 (see
our previous article
here). The Supreme Court confirmed that the original iconic
helmets used in the 1977 Star Wars film were not artistic works (in
particular sculptures) and so could not be protected under
copyright law (for 70 years plus the life of author), as their
purpose was primarily utilitarian, namely as props for the film.
They were therefore covered under design right but the period for
protection for unregistered design right is much less than
copyright and had expired. The prop designer, Andrew Ainsworth, who
made the helmet, was therefore able to continue selling replicas on
his own website.

It has also been reported in the press that Lucasfilm pursued a
company which was manufacturing laser products, which, although
were not being branded as relating to Star Wars lightsabers in any
way, were being called 'real-life lightsabers'. It appears
that Lucasfilm was also concerned that the handles of these laser
products were too similar to the handles of the lightsabers in the
films and so decided to sue for copyright infringement.

Film soundtracks are protected by copyright as part of the film
when songs/music are incorporated in the film and broadcast in the
cinema or on the television, but they are protected as a sound
recording in other circumstances, such as when the recordings of
the songs/music are played on the radio or on a CD.

Trade Marks

In basic terms, trade marks can be registered for specific goods
and services to distinguish one business from another and can take
various forms, such as words, logos, slogans, shapes, colours and
sounds. Global trade mark databases indicate that Lucasfilm owns
thousands of trade marks in relation to Star Wars which are applied
to an enormous range of products. Lucasfilm is renowned for being
litigious, so think twice before using any Star Wars related words
or images without a licence! Here are a few examples of just some
of the marks registered by Lucasfilm:

The word mark 'Lightsaber' has also been registered as
a trade mark for toys, games, puzzles, scooters, Christmas
decorations, snowboards, arm bands and many more.

Fictional character names (which cannot be protected under
copyright) are registered such as Luke Skywalker, Yoda, The Jedi
Master, Count Dooku, Stormtrooper, Darth Vader, Obi Wan Kenobi, Jar
Jar Binks, Jabba The Hutt, Chewbacca, C-3PO and R2-D2 to name just
a few.

As well as C-3PO and R2-D2 being registered as word marks,
(covering a wide range of products such as Halloween costumes,
stationery and magazines) they also have graphic representations as
shown below:

Droid has also been registered as a trade mark for which
Verizon Wireless have reportedly had to obtain a licence, despite
the fact that they launched their Android phones, branded Droid,
after registration by Lucasfilm.

Neither film titles nor slogans attract copyright protection in
the UK (although this may be up for debate following the
Meltwater case). However, they can be registered as trade
marks as can be seen by the trade mark registration for 'May
The Force Be With You' which is often seen on clothing and
toys.

Film titles have also been registered as trade marks such as
The Force Awakens and Revenge of The Sith.

Designs

In general, it is a relatively simple and inexpensive process to
obtain UK registered design protection or Registered Community
Design protection for the outward appearance of a product (or part
of it) provided the designs are new, have individual character and
are not dictated exclusively by their technical function.
Unregistered Design Right also arises automatically upon the
creation of an original (i.e. one that is not commonplace in the
design field at the time of its creation) design (design being the
shape or configuration) of objects.

Global searches indicate that Lucasfilm is the owner of various
designs for example, toys C-3PO and R2-D2 as follows:

A patent provides 20 years of exclusivity to exploit an
invention in return for the disclosure of information about the
invention, which can then be freely used by the public when that
patent expires. The justification for a patent exclusivity is that
it encourages innovation by rewarding the inventor.

As an example, Disney Enterprise, Inc. owns the US patent for
the drive system that controls the rotation of the sphero BB-8
droid – the highly sought after must-have Christmas gift of
2015, sold in the UK by a range of retailers including John Lewis,
ASDA, and was the no. 1 best seller on Amazon. BB-8 is a droid that
features in The Force Awakens. It has a ball shaped body
which rolls independently from its head and the toy can be operated
from a smartphone or tablet.

Sometimes the inventor(s) might be an employee of a company in
which case, the invention, if created in the normal course of the
inventor's employment, will belong to that company. In other
cases however, where the inventor is not an employee of the
company, the patent rights will need to be assigned, as appears to
be the case for the BB-8 droid patent.

Licensing/merchandising of intellectual property rights

General

Merchandising of intellectual property rights can be incredibly
lucrative for businesses. Merchandising refers to a wide range of
activities that increase the visibility and accessibility of
products, including window displays and shop floor layouts but this
article will focus on the merchandising of IP rights.

Over the years, merchandising has switched from being useful,
but not essential, to being a major contributor to the business
strategy. George Lucas made a lucky decision back in the 1970s when
he traded a rise in salary for future merchandising rights. It
seemed like a good deal at the time for the film studio because
merchandising did not carry the same value it does today. But no
one could have predicted the unprecedented popularity and success
of Star Wars.

Producers and distributors do not usually manufacture
film-related products themselves. Typically they license the right
to other companies (the "Licensee") to use names,
characters, art work and music to produce spin off products such as
toys, clothing, books and sound tracks. In most cases there is no
risk to the producer or distributor (the "Licensor")
because the licensee incurs all manufacturing and distribution
expenses. The Licensor normally receives an advance payment for
each product (it has been reported that Disney took enough down
payments from exclusive brand partners to amply cover the $200m
that it cost to make the film), as well as royalty payments, which
are typically between five and 10 percent of the gross revenue from
sales to retailers (the wholesale price). If the film is a flop and
the products do not sell as well as expected, the manufacturer
incurs the loss. Interestingly it has been reported that licensees
are so keen to be part of the Star Wars merchandising phenomena
that they are agreeing to royalty rates as high as 20%.

It has been reported that 40% of film merchandise is sold before
the film is even released. Licensed products can generate billions,
especially for films like The Force Awakens which appeals
to both children (even though the film is rated as 12A), teenagers
and adults alike. Merchandising strategies, however, must be
carefully thought through in order to maximise the exploitation of
the intellectual property rights. It is also difficult to predict
whether demand will outstrip supply. For example, when Star
Wars – The Phantom Menace was released, there was an
overestimation of demand relating to this merchandise which led to
one official licensee with a surplus of spin off books. On the
other hand, Disney's box office hit Frozen was far
more popular than anticipated and supply could not keep up with
demand.

Perhaps having learnt its lesson from Frozen, Disney
has been very clever with its marketing strategy for The Force
Awakens. This time, Disney orchestrated a 'product
preview' merchandising event on what became known as 'Force
Friday' on 4 September 2015 and unveiled its new product range
3 months before the film was released. Details of product designs
were not revealed until midnight on Force Friday, sparking record
levels of excitement and interest. Disney streamed 18 hours of live
footage unveiling its new products in 12 different countries and 15
different cities.

Products and licensees

There is more to successful merchandising than simply slapping
branding on toys, mugs and clothing. Identifying and selecting a
comprehensive list of products to sell and choosing suitable
official merchandising partners (licensees) who will produce high
quality products is of paramount importance. Quality of merchandise
is key as it affects how the brand is perceived. It is also
important to recognise the target audience – in this case the
Star Wars brand appeals to both adults and children so there will
be a myriad of products that could be sold whereas with Harry
Potter for example, it would be inappropriate to sell Harry Potter
branded alcohol whereas it appears you can buy Skywalker branded
wines from Skywalker Vineyards (owned by George Lucas) should you
be so inclined!

Disney will no doubt be exercising strict quality control over
its licensees to ensure the Star Wars brand remains intact. Star
Wars is already such a huge brand that it is hard to see how it can
be tarnished. However, there are already a number of unusual
products on the market (lightsaber stiletto shoes for example!)

Disney and licensees alike will be looking to negotiate
beneficial contracts and licensees will be looking to capitalise on
the association. Merchandisers can increase their exposure and
enhance their brand's image which can open up new markets. Some
of the official licensees vary from huge toy giants who are already
well-known and have a huge reputation e.g. Hasbro, Mattel and the
Lego Group, to smaller more low profile businesses. For example,
the LA jeweller known as Han Cholo, has been licensed to create a
special jewellery collection for the new film and this has
obviously opened up many new avenues for the bespoke jeweller. The
merchandising deal has also been particularly beneficial for
low-profile US company Vandor Products which sells everyday items
such as branded glassware and lunchboxes but now enjoys seeing its
products, which feature Star Wars images, being sold just about
everywhere. Such is the marketing power of Disney.

In addition to the merchandising deals that Disney has
negotiated, it also produces its own bespoke, exclusive range of
products available in Disney stores.

Film distribution rights

Merchandising sales have already been huge and that's even
before the DVDs have gone on sale – at the time of writing,
the DVD is available for pre-order and the release date is
estimated to be May 2016. Fans will remember the famous 20th
Century Fox drumroll and fanfare at the beginning of the Star Wars
films but since Disney's acquisition of the Lucasfilm
franchise, Walt Disney Studios are now the film distributors and
have replaced this in the opening sequence in all of the films
(apart from the original 1977 film (which became known as Star
Wars Episode IV: A New Hope) for which 20th Century still
appears to own the rights) with the Lucasfilm logo. There are box
sets with a complete set of Star Wars feature films, old and new,
so presumably 20th Century Fox and Walt Disney Studios must have
come to an agreement in relation to the distribution.

Roll on 2017.....

The last Star Wars film was Revenge of the Sith in 2005
and as Disney rightly anticipated, there has been "substantial
pent-up demand". This is evident when you look at the kinds of
figures associated with The Force Awakens. It will be
interesting to compare the figures after the release of Star Wars
8, expected in May 2017. In the meantime, The Force
Awakens continues to pull in the crowds (it opened in China
– the world's second biggest film market after the US
– on 8 January 2016) and generate serious amounts of
revenue.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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As readers will be aware, negotiations between the UK and EU negotiators over a Brexit deal are ongoing. There have, however, been some welcome moves towards certainty in the area of trade marks and designs:

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